China exports cheap goods and imports inflation

For decades, Chinese manufacturers have been exporting goods at low (sometimes below-cost) prices. Accumulated trade surplus have made China cash-rich but not wealthy. Money has been created to subsidise entreprises. Debts in these entreprises will increase with compound interest. Money creation will eventually lead to inflation. So one could say that China has been exporting cheap goods and importing inflation.

1. Chinese manufacturers are willing to export goods at low (sometimes below-cost) prices.
   1. Chinese enterprises do not pay the real costs.
      1. Environmental cost may not be fully accounted for.
      2. Employee safety is sometimes compromised.
      3. Employee welfare is sometimes compromised.
   2. There are many reasons why Chinese manufacturers are willing to sell at low prices.
      1. Decision makers are measured by the amount of sales that they make, not by profit and loss.
      2. Export is one way to transfer money out of China.
      3. Money out of China are safer and easier to transfer from organisations to individual pockets.
   3. Most enterprises are state-owned, so profit or loss do not matter.
      1. When a state-owned enterprises is in deficit, it can always get funding from the government.
2. By exporting goods below cost, China absorbs inflation from the importing countries.
   1. This is because Chinese exports will keep the consumer prices in these countries low.
   2. That means Chinese exports help to lower inflation in the importing countries.
3. Environmental and social costs have to be paid for, directly or indirectly, e.g:
   1. Environment damages may cost illnesses to people, which affects productivity.
   2. Explosions happen frequently in China. They destroy wealth.
   3. Social unrest could disrupt production.
4. Beijing has to create new money to fund losses in state-owned entreprises.
   1. These debts will never be repaid unless these entreprises start to earn money.
   2. New debts must be issued to cover interest payment of old debts.
   3. Chinese entreprises accumulated a large amount of debt.
   4. With compound interest, debts will increase exponentially.
5. Accelerated money creation will eventually lead to inflation.
6. One could say that China has been exporting below-cost goods and importing inflation for over 30 years.

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